The character of liability lines whose claims settle years after underwriting, letting inflation compound over the whole period.
A long-tail line is one whose claim is reported and settled long after the premium is collected, sometimes a decade, unlike property where settlement closely follows occurrence. That lag looks anodyne and is formidable in practice, for it turns the liability insurer into the seller of a long option on future litigiousness. A policy priced to the verdict norms of one year will be paid to those, far heavier, of ten years later, and the most modest annual gap becomes a chasm through compounding. The long tail is thus the multiplier of social inflation, and the reason a reserving deficit reveals itself only belatedly.
A cover priced in 2020 on the basis of 2020 verdicts will be settled in 2030 against 2030 verdicts, and the gap is a dead loss.
branche longue, long tail, déroulé long